1. Field of the Invention
The present invention relates to accounting and more particularly to processing of adjustments in consolidations.
2. Description of Related Art
Consolidation is the combination of accounts of multiple source ledgers into one consolidated ledger. These multiple source ledgers may contain accounts of a parent company and all subsidiaries within a single business entity. Referring to FIG. 1a, a conventional consolidation system is shown. Typically, data entries from the multiple source ledgers are sent to the consolidation ledger 102. Then, the consolidation processor 104 performs consolidation processing on the consolidation ledger 102 entries. The consolidation processor 104 usually comprises an inter-company eliminations module 106 for performing inter-company eliminations (i.e., elimination of activities between two subsidiaries of the same business entity), a NCI eliminations module 108 for performing non-controlling interest eliminations (i.e., elimination of equity of subsidiary against a parent investment), and an equitization module 110 for reflecting net income of a subsidiary on a parent's ledger. Once the consolidation processing is complete, results are output to a journal 112, and posted by a post module 114 back to the consolidation ledger 102.
However, users often need to make adjustments to the consolidation data (e.g., for statutory or management purposes). Referring now to FIG. 1b, a prior art consolidation system for performing adjustments to a consolidation ledger 102 is shown. The consolidation process as described in connection with FIG. 1a (i.e., solid lines) is initially performed. In the adjustment consolidation process (i.e., dashed lines), adjustment entries are provided to an adjustment journal 118. The adjustment journal 118 is then posted to the consolidation ledger 102 via the post module 114. Once posted, the consolidation data (i.e., original ledger rows along with the adjustment rows) are then processed through the consolidation processor 104, and the results are output to the journal 112. Finally, the journal 112 entries are posted by the post module 114 back to the consolidation ledger. The contents of the consolidation ledger 102 may be viewed via an inquiry module 116.
Disadvantageously, this prior art system requires the posting of adjustments to the consolidation ledger 102, reprocessing of all relevant data in the consolidation ledger 102, and posting of results back to the consolidation ledger 102. Consequently, the prior art consolidation system is inefficient and time consuming. For example, a parent company and its subsidiaries may have 2,000,000 rows of data in the consolidation ledger 102. Of these 2,000,000 rows of data, a consolidation process may run with 500,000 ledger rows (e.g., revenues and expenses for the subsidiaries) which total $75,000 across 199 different departments. Consolidation processing will result in a 200 line (i.e., row) journal 112 entry (one line for each of the 199 different departments and one line debiting a parent investment for $75,000) for a total of $75,000. Subsequently, the journal 112 entry is posted to the consolidation ledger 102 resulting in a new overall row count of 2,000,200.
Assume now that the adjustment journal 118 contains additional revenue for five departments for a total of $3,000. Using double entry accounting, there are ten rows of detail in the adjustment journal 118 (i.e., five rows for revenue entries and five rows with offsets to cash). Initially, the adjustment journal 118 is posted by the post module 114 to the consolidation ledger 102 resulting in the row count rising to 2,000,210. The consolidation processor 104 then runs the consolidation process. First, the results of the previous consolidation processing are reversed from a ledger balance (i.e., 200 rows are updated, 0 rows are added or deleted). Then, 500,010 ledger rows (i.e., the updated 500,000 ledger rows and the 10 rows of details with the adjustments) are input to the consolidation processor 104 which now total $78,000 across 204 different departments (199 original departments and five departments with the adjustments). The result is an output with a 205 line (i.e., row) journal 112 entry (i.e., one line for each of the 204 different departments and one line debiting a parent investment for $78,000). Finally, the 205 line journal 112 entry is posted to the consolidation ledger 102 updating the 200 rows added in the previously consolidation processing and adding five new rows. Resultingly, the consolidation ledger 102 now contains 2,000,215 ledger rows.
As is evident from this example, the amount of time required to process just five adjustments is approximately the same as for processing an entire data set (i.e., the original 500,000 ledger rows). Thus, prior art systems are inefficient. Furthermore, because the post-adjustment consolidation journal 112 is posted to the consolidation ledger 102 before a user is allowed to view the results, there is limited visibility into how adjustments impact an overall consolidation prior to approval and finalization. Consequently, prior art consolidation systems do not allow the user to quickly and efficiently perform “what-if” analyses and incremental changes to consolidated data.
Therefore, there is a need for a system and method for efficiently processing adjustments in consolidation.